COVID-19: Alert Levels, Regional Support, Tax and Insolvency - Peter Vial, FCA Charlotte Evett, CA John Cuthbertson, FCA Kare Johnstone, CA
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COVID-19:
Alert Levels, Regional
Support, Tax and
Insolvency
Peter Vial, FCA
Charlotte Evett, CA
John Cuthbertson, FCA
Kare Johnstone, CA
COVID-19: Alert Level 3
Applies from Tuesday 28 April until at least Monday 11 May
Key Government messages for shift from Level 4 to Level 3:
• People must continue to work from home unless that is not possible
• Businesses can open premises but cannot physically interact with customers
• Make your business COVID-19 safe – plan ahead
Permitted workplace activities
https://www.business.govt.nz/covid-19/workplace-operations-covid-19-alert-levels/
© Chartered Accountants Australia and New Zealand 2020
COVID 19: Alert Level 3
I can technically work from home but it is really inconvenient e.g. because my IT
services are too slow or I want access to printing. Can I go into the office at Alert
Level 3?
You must work from home at Alert Level 3 unless that is not possible. We
understand this isn’t always very convenient, and may result in people being less
productive than they otherwise would have been in an office. However we all need
to play our part in stopping the spread of COVID-19. Even if it is inconvenient,
people still need to work from home wherever possible.
https://www.business.govt.nz/covid-19/workplace-operations-covid-19-alert-levels/
© Chartered Accountants Australia and New Zealand 2020
COVID-19: Alert Level 3 - Golden Rules
• If your business requires close physical contact it can’t operate
• Your staff should work from home if they can
• Customers cannot come onto your premises
• Your business must be contactless
• Basic hygiene measures must be maintained
• If you used PPE in your business before COVID-19, then keep using it in the same way.
If you didn’t use PPE in your business before COVID-19, you don’t need it now.
• You must meet all other health and safety obligations
© Chartered Accountants Australia and New Zealand 2020
COVID-19: Safe start
• Before reopening businesses should self-assess their ability to operate safely
• Planning, Hygiene, Distancing, Tracing, Communicating (PHDTC)
• Think about how to manage risks and protect staff and customers
Level 3 is a
• Document a COVID-19 safety plan and share it with staff waiting or a
recovery room
© Chartered Accountants Australia and New Zealand 2020
COVID 19: Workplace controls
Controls to minimise the risk of passing on COVID-19 at work:
• Supporting people with flu-like symptoms to self-isolate
• Ensuring separation distances (1metre in workplaces, 2 metres public transport)
• Disinfecting surfaces
• Maintaining good hygiene, particularly hand hygiene and cough/sneeze etiquette
• Keeping records to facilitate contact tracing
WorkSafe has released a plan template –see :
https://worksafe.govt.nz/managing-health-and-safety/novel-coronavirus-covid-19/your-covid-19-safety-plan/
© Chartered Accountants Australia and New Zealand 2020COVID-19: Level 2
• Think ahead
• Business premises can be open for staff and customers with appropriate
measures in place
• Alternative ways of working encouraged
• remote working
• shift-based working
• physical distancing
• staggering breaks
• flexible leave
© Chartered Accountants Australia and New Zealand 2020COVID-19: Wage Subsidy
• https://workandincome.govt.nz/covid-19/support-for-employers.html
• https://omny.fm/shows/ca-anz-covid-19/nz-wage-subsidy-scheme-webinar
• https://www.charteredaccountantsanz.com/news-and-analysis/news/the-
government-wage-subsidy
© Chartered Accountants Australia and New Zealand 2020Wage Subsidy Recap
• Most employers affected by COVID-19 are eligible to apply for a wage subsidy
• Criteria include a minimum 30% decline in actual or predicted revenue in a month
• Businesses which no longer meet the subsidy eligibility criteria or provided false or
misleading information in their application will be required to repay the subsidy.
• Wage subsidy payments will be subject to audit and review, and Ministers have
signalled serious consequences for abuse of the system.
• CA ANZ members are bound by the NZICA Code of Ethics, which requires integrity
in all business and professional relationships.
© Chartered Accountants Australia and New Zealand 2020RBPN Funding available to support small and medium businesses
COVID-19: Business Support Funding
• Additional $25m funding provided to RBPN for COVID-19 business support
• Purpose: to support business survive immediate aftermath of COVID-19 and
transition into recovery mode
• Leverages existing RBPN growth scheme focused on training.
• Focus now on advisory and consultancy support.
• Website narrative not updated in all cases to reflect this.
• Funding available per business differs region to region. E.g. Wellington $2.5K,
Auckland $2K, Waikato $2.5K, Christchurch $2K
© Chartered Accountants Australia and New Zealand 2020Eligibility for Support
• Available to small and medium business with:
• 49 or less FTE employees
• GST registered
• Expert support available in the following (broad) areas:
• Finance and Cashflow Management
• Business Continuity Planning
• HR
• Health and Wellness
• Provided by registered service providers, accessed online
© Chartered Accountants Australia and New Zealand 2020How to Apply for RBPN Funding and Support
• Register for funding online
• Contact your local Regional Economic Development Agency for additional
information
• When applying , bear in mind that online application reflects pre-COVID
growth focus
• Businesses should interpret questions such as ‘Do you need help to grow your business’
simply as ‘Do you need help’
© Chartered Accountants Australia and New Zealand 2020Registering as a COVID-19 Business
Support Service Provider
Charlotte EvettEligible CAs can also register as COVID-19
Business Support Service Provider
• Open to any provider with a physical presence in New Zealand
• Must have Professional Indemnity Insurance cover minimum $1 million
• To provide expert advisory or consultancy support services in one or all of the
following areas:
• Finance and Cashflow Management
• Business Continuity Planning
• HR
• Health and Wellness
© Chartered Accountants Australia and New Zealand 2020How to register as a COVID-19 Business Support Service Provider • Register as a provider online • Current backlog of up to two weeks prior to acceptance as service provider • CA ANZ in contact with NZTE re possible streamlining for CAs © Chartered Accountants Australia and New Zealand 2020
7 May Provisional Tax Options
3rd instalment 2020 provisional tax
John Cuthbertson7 May Provisional Tax Options • Key considerations • Late payment – Consequences (if any)? • Options where cash constrained © Chartered Accountants Australia and New Zealand 2020
Key Considerations (Taxpayer specific)
• Extent impacted by COVID-19
• Balance date
• Industry
• Subsidy coverage
• Forecast tax position
• RIT $60K
• Provisional tax paid to date/Basis adopted
• Expected 2021 tax position
• Carry back of estimated loss (optional)
© Chartered Accountants Australia and New Zealand 2020Late Payment – Consequences (if any)
• Dependent on:
• Tax position (taxpayer specific) AND
• Provisional tax method used by taxpayer
• Remission of interest & penalties on late payment where taxpayer impacted by COVID-19 (deferred
payment arrangement with IR)
BUT (there is a fish hook)
• Ineligible to use standard uplift method = Potential exposure to UOMI from P1 to P3 (depending on
provisional tax payment profile)
© Chartered Accountants Australia and New Zealand 2020Options where cash constrained
• Utilise tax financing – Financing cost only payable upfront, have until June 2021 to settle balance
(core tax)
• Don’t make tax payment on due date and either:
• Notify IR and enter into deferred payment arrangement; or
• Subsequently make a tax purchase (of 7 May 2020 tax paid) from a Tax Pool
• Watching Brief – Whether IR will apply proposed new administrative discretion to extend P3 2020
due dates for COVID-19 impacted taxpayers
© Chartered Accountants Australia and New Zealand 2020COVID-19 knowledge sharing series Insolvency relief for businesses impacted by COVID-19 23 April 2020
For more information regarding this presentation
Kare Johnstone - Partner
P +64 9 926 5125
M +64 21 820 362
E kjohnstone@mcgrathnicol.com
Andrew Grenfell - Partner
P +64 9 926 5115
M +64 21 748 765
E agrenfell@mcgrathnicol.com
Conor McElhinney - Partner
P +64 9 926 5105
M +64 27 952 8680
E cmcelhinney@mcgrathnicol.comGovernment proposals: insolvency relief for businesses ▪ Profitable and viable companies face a real risk of failure due to COVID-19 and the current inability to predict outcomes ▪ Government announced changes to the Companies Act to help businesses survive until trading returns to “normal” ▪ Key changes: Safe harbour Hibernation ▪ Not available for licensed insurers, registered banks, non-bank deposit takers and sole-traders Cabinet paper submitted 9 April 2020. Uncertainty exists until passed and devil will be in the detail
Safe harbour
Current position Changes
▪ Directors trading while insolvent are at risk of breaching the ▪ Directors continuing to trade and/or take on new obligations
following key sections of the Companies Act: over the next 6 months will be exempt from s135 and 136 if:
s135 (reckless trading) a director of a company must not: in good faith the company is facing liquidity issues due to COVID-19;
and
＞ agree to, or cause or allow, the business of a company to
be being carried out in a manner likely to create a the company was able to pay its debts at 31 December 2019; and
substantial risk of serious loss to the company’s creditors
in good faith the company is more likely than not to be able to pay its
s136 a director of a company must not:
debts as they fall due within the next 18 months.
＞ agree to the company incurring an obligation unless the
▪ Government has asked that these provisions are back dated
director believes at that time on reasonable grounds that
the company will be able to perform the obligation when to 9 April 2020
it is required to do so ▪ Not available for licensed insurers, registered banks and non-
bank deposit-takers
Key takeaway: Must act in good faith. Directors cannot rely on this if the business was unable to meet its
debts at 31 December 2019 and already distressed/insolvent before COVID-19Business debt hibernation / COVID-19 standstill
Purpose: Temporary moratorium (standstill) on debt payments
▪ One month moratorium on enforcement action from notification of a proposal
▪ Further six month moratorium if proposal passed by 50% of creditors ($ and #)
▪ During the moratorium:
＞ company can continue trading, subject to conditions agreed with creditors under proposal
＞ creditors unable to take enforcement action (e.g. issue statutory demand, repossession)
＞ voidable transaction regime suspended for third parties (good faith test)
▪ If the proposal is rejected:
＞ creditors can take enforcement action
＞ existing options under the Companies Act remain:
＞ Voluntary Administration, Creditors Compromise, Liquidation
Key takeaway: Debt deferral only. How will you pay creditors in six months’ time? Can you generate enough
profit and cash to recover the lockdown losses and working capital to restart? What will your new norm look like?Restructuring options for distressed businesses
Act early for a greater chance of rescue
Low distress Medium distress High distress
Few (if any) aged creditors, the IRD is up to Limited free cash and a number of aged Not enough cash to pay wages/rent next
date, but the business is losing money, is creditors and/or IRD arrears. There is a risk month and/or received statutory demands
over-leveraged, or is suffering a temporary of creditors issuing statutory demands. from creditors/the IRD. Lost confidence of
cash flow issue due to the lockdown. the Bank, who will not lend more money.
1 2 3 4 5
Does the business need protection from Is there part of the business that could
creditors taking action against the company; be viable following a restructuring or
e.g. issuing statutory demands or threatening less leverage?
to repossess stock?
And/or
No
No Yes
Business Business Voluntary
Performance Informal Creditors
debt debt administratio Receivership Liquidation
improvement restructuring compromise
hibernation hibernation nQ&A
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This publication is intended to provide general information and is not intended to provide or substitute legal or professional advice. This publication has been prepared so that is current as at the date of writing. You should be aware that such information can rapidly become out of date. You should not act, or refrain from acting, or rely on any statement, view or opinion expressed in this publication. You should make and rely on your own inquiries in making any decisions or giving any advice. No warranty is given as to the correctness of the information contained in this publication, or of its suitability for use by you. To the fullest extent permitted by law, Chartered Accountants Australia and New Zealand (CA ANZ) is not liable for any statement or opinion, or for any error or omission contained in this publication and disclaims all warranties with regard to the information contained in it, including, without limitation, all implied warranties of merchantability and fitness for a particular purpose. CA ANZ is not liable for any direct, indirect, special or consequential losses or damages of any kind, or loss of profit, loss or corruption of data, business interruption or indirect costs, arising out of or in connection with the use of this publication or the information contained in it, whether such loss or damage arises in contract, negligence, tort, under statute, or otherwise. © Chartered Accountants Australia and New Zealand 2020
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